Indicators Dictionary
19 financial metrics explained in plain English. What they measure, how they're calculated, and why they matter.
Rule of 40
A benchmark for software and high-growth companies that combines revenue growth with profitability. A score of 40 or above is considered healthy.
Free Cash Flow
The cash a company generates after accounting for capital expenditures. The real money left over to pay dividends, buy back shares, reduce debt, or reinvest.
FCF Margin
Free cash flow as a percentage of revenue. Measures how efficiently a company converts sales into actual cash.
Gross Margin
The percentage of revenue remaining after subtracting the direct cost of goods sold (COGS). Shows how much profit a company makes on its core product before overhead.
Operating Margin
The percentage of revenue remaining after all operating expenses (COGS, SGA, R&D) but before interest and taxes.
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization. A proxy for operating cash generation that strips out financing and accounting decisions.
Net Income
The bottom line — total profit after all expenses, interest, taxes, and one-time items. What's left for shareholders.
Revenue Growth (YoY)
The percentage increase in revenue compared to the same period one year ago. The most fundamental growth metric.
Revenue
Total sales or income generated by a company before any expenses are deducted. Also called "top line" or "sales."
Price-to-Earnings Ratio
How much investors pay per dollar of earnings. The most common valuation metric — tells you if a stock is "expensive" or "cheap" relative to its profits.
Earnings Per Share
Net income divided by the number of outstanding shares. How much profit each share of stock "earns."
Price-to-Sales Ratio
Market cap divided by annual revenue. Useful for valuing unprofitable high-growth companies where P/E doesn't work.
Price-to-Book Ratio
Market cap divided by book value (total assets minus liabilities). Compares market price to the company's net asset value.
Enterprise Value
The total theoretical takeover price of a company — market cap plus debt, minus cash. What you'd actually pay to buy the entire business.
Market Capitalization
The total market value of a company's outstanding shares. The market's verdict on what the entire company is worth.
Shares Outstanding
The total number of shares of stock currently held by all shareholders. Includes restricted shares held by insiders but not unexercised options.
Short Interest
The percentage of a company's float that has been sold short — betting the price will decline. A measure of bearish sentiment.
Dividend Yield
Annual dividend payment as a percentage of the stock price. The "interest rate" you earn just for holding the stock.
Beta
A measure of a stock's volatility relative to the overall market (S&P 500 = 1.0). How much the stock moves when the market moves.